Speculative Demand for Money

Speculative demand for money refers to the amount of cash individuals and businesses hold to take advantage of potential investment opportunities or changes in asset prices. When they anticipate that bond or stock prices might fall, they prefer to keep cash instead of risking losses. This behavior is driven by the desire to wait for better opportunities or avoid potential financial risks. Essentially, it reflects holding money not for everyday transactions, but as a strategic choice based on expectations about future market conditions.